Insider Fraud – Restoring trust

  • Causes, consequences and cures

In every business irrespective of size or industry the key elements of trust, integrity and honesty exist.

Very often when we hear about a crime like thief through deception it is committed by nameless, faceless and unknown 3rd parties.  Over the last year criminals have made the most of the COVID-19 pandemic and how the working arrangements rapidly changed to create opportunities to defraud businesses, people and charities alike.  But what happens when these key elements are destroyed as a result of insider fraud carried out by known long standing and trusted members of staff?

When this happens the feelings of hurt, violation and upset can be even more intense and the impact to the organisation even more acute. It can take a very long time and a lot of effort to rebuild trust.

Why do people commit insider fraud?

There isn’t a prescribed list of reasons for why someone will commit a crime such as stealing money.  Sometimes it is driven through desperation as they may have gotten themselves into serious debt through online gambling, or they feel that they are undervalued and that they deserve more from their employer.  Also, it isn’t always something like cash or stock which is stolen; other assets which have a monitory value can also be taken this can include customer data including name, address, date of birth etc.  All of which can make a person more vulnerable to identity theft or other crimes which could result in additional costs to the business through GDPR breaches.

Whatever the reason, the consequences can be life altering, with loss of friends and family, and even custodial sentences being quite common.

How should a suspicion of fraud be handled?

Depending on how the fraud is detected the course of action will vary.  Where the fraudster is caught ‘red handed’ it can be slightly more straightforward to deal with.  However, where there are merely suspicions of fraudulent behaviour  more investigation and substantiation need to be completed before the suspect can be challenged.

What is important to note though is that as soon as there is either a suspicion of fraud or hard evidence that a crime has occurred, then professional advice from a solicitor, HR consultant or even the police is sought.  Taking action without proper advice could undermine any investigation or prohibit any recourse.

Another critical point to remember, is that it that only those who need to know about situation are made aware and are engaged.  It is vital that investigations like this are carried out in the strictest of confidence. Should the outcome lack definitive evidence or find that no wrong doing has been committed, and the suspect has become the subject of gossip or bullying then there is a possibility that they may bring civil proceedings against the business and those involved in their ill treatment.

How businesses recover from an incident of insider fraud?

As outlined already there is no denying that a crime like fraud can have huge if not dire consequences for all parties involved.

Assuming that the business can recover it will take time, effort and commitment to do so.  An important point to keep in mind is that this incident is the result of actions by a ‘lone wolf’ not everyone in the business.

I remember a situation from earlier in my career where a person had committed fraudulent unauthorised trading activities.  The work I was directly involved in centred on creating process controls to prevent a similar event occurring in the future.  Although this work was successful in fulfilling its brief, there was an unexpected wider organisational change beyond the scope of this work.  Employee morale and trust was damaged, particularly of those who had worked alongside the fraudster (but not directly involved in facilitating their actions).  The tone of the investigation had created an environment where employees themselves were made to feel that they had been active participants or enablers of the crime, rather than being unsuspecting bystanders or victims themselves.

This resulted in the work environment changing dramatically.  Staff felt that they were always under suspicion of acting inappropriately and that they were no longer trusted the perform their roles competently as some of the controls implemented where extremely draconian and required constant justification.  Over a relatively short period of time a number of highly experienced and knowledgeable people left which acted as a headwind against recovery and a return to ‘normal’.

To recover quickly, effectively and well from a incident there are a number of stages beyond the obvious closing of gaps need to be factored into any recovery plan.

  • Mourning – depending on the nature of the deception some may feel personally violated as their trust and judgement in people may be undermined or called into question.
  • Lessons learnt – what can be learnt by those involved and the organisation to prevent such things occurring again.
  • Recovery – as part of moving forward new protocols may be implemented, these changes will help staff to accept the old way is over and to move forward.

How to prevent fraud from occurring in the first place?

Obviously, each business is unique and there will be different factors which mean that there is no ‘one size fits all’ approach to preventing fraud.  There  are some key tenants which we at Green Robin Solutions utilise with our clients to prevent fraud or to help the business recover from such incidents.  These include having good process governance which can help to prevent fraud from occurring in the first place or being able to detect it early far more likely.

If there are parts of your business, which are concerned could be a target of a crime or you are being kept awake at night worried about how a crime like insider fraud could impact your business, then why not give us a call?  It is always easier to manage a situation where is a plan in place rather than reacting to a situation.

Green Robin Solutions works with small to medium businesses helping them to navigate a rapidly changing world. Green Robin Solutions has particular expertise in helping professional services to achieve “Operational Excellence” and an accredited Lexcel consultancy practice.

We offer a no obligation 30-minute consultation to discuss resilience, continuity and disaster planning, and more widely how problem processes within your business can be dealt with.



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